Chapman University economists say recovery is imminent, but it will take until 2010 for the benefits to become evident to many because the state is in such deep trouble.
By Alana Semuels
An economic recovery will begin in the second half of this year, but many Californians won't feel the benefits until 2010, forecasters from Chapman University said Wednesday.
That's because the Golden State is in its deepest and most profound recession since the Great Depression, dragged down by sluggish construction activity in both the residential and nonresidential markets.
The Chapman forecasters expect nonfarm payroll employment in California to continue falling into next year before beginning to rebound in the fourth quarter of 2010. California will lose an estimated 437,000 jobs in 2009 and an additional 56,000 jobs next year, they said.
Orange County will shed 46,000 jobs in 2009 and 2,000 more in 2010, forecasters said, marking its worst recession since the end of World War II.
"These kinds of job losses are unprecedented," said Esmael Adibi, director of the university's A. Gary Anderson Center for Economic Research, to a record crowd of attendees at the presentation of Chapman's economic forecast at a hotel in Costa Mesa.
Job losses have spilled across all sectors as layoffs in the construction industry led to cutbacks at law firms, accounting firms and most other sectors, excluding health and education. Even as the economy turns around, cautious companies will probably be slow to begin hiring again, which will lead to a sluggish recovery in the state.
"Look at a CEO. Even if they see their sales go up, they're not going to rush out and hire anybody," Adibi said. "They want to make sure it's real."
Manufacturers in California also have been ailing as trading partners such as China and Russia reduced purchases of goods.
The state's merchandise exports have fallen 28% from their peak of $38.4 billion in the second quarter of 2008 to $27.6 billion in the first quarter of this year.
Feeling gloomy about the economy, U.S. consumers stopped spending too. But that has created a pent-up demand for products such as electronics that consumers have been waiting to buy until they feel more optimistic about the future, Adibi said. The manufacturing and transportation sectors will also grow as other countries ramp up their own stimulus packages, helping retailing grow globally.
The Southern California median home price last month was $249,000, down 51% from May 2007, according to figures released Wednesday by MDA DataQuick of San Diego. It's the fifth straight month that median prices have hovered around $250,000, though May did show a slight increase in prices for the region.
Chapman forecasters expect home prices to strengthen in 2010 as banks become more willing to lend to prospective buyers and fewer new homes come on the market. Home prices will rise 0.8% in the state next year after falling 35% in the state in 2008, the economists say.
Nationally, the picture is a little sunnier because of the effects of the government's $787-billion stimulus package. Increases in unemployment benefits and Social Security payments have helped offset spending declines caused by layoffs and salary cuts.
Banks have made it easier to get loans, brightening the outlook for business investment this year. And recovery in the economies of the United States' trading partners is forecast to help the country's real gross domestic product turn positive during the third quarter of this year.
The recovery won't be as quick as it has been in other recessions because consumers have started saving more, the forecasters said. The annual personal savings rate has jumped to 4.2% from virtually nothing. But in the long run, that's good news. And, looking down the road to 2010, so is the economic forecast.
"If you believe us, recovery is imminent," said James L. Doti, president of Chapman University.
That's not much help for Lake Forest resident Katie Murphy, a 26-year-old public relations specialist who was laid off in October. Her husband, Sean, an IT specialist, was laid off last month.
She has enrolled in training to hone her skills in social media, which she hopes will help her get a better job, but so far she hasn't had any luck. She tries to stay optimistic as she submits her resume to companies and doesn't hear anything back, she says.
"Obviously, the economy can't be like this forever. Eventually it's going to turn around," she said. "But it's frustrating to hear that there's not going to be job gains for a while."